On Friday, the International Monetary Fund (IMF) suggested that governments should work on new stimulus plans to face the global economic downturn. IMF hopes to anticipate the economic weakness expected over the next two years.
AFP - The International Monetary Fund Friday called on governments to consider taking new stimulus measures through 2010 as the current global economic downturn continues.
"Given the anticipated weakness in the global economy over the next two years, consideration should be given to providing fiscal stimulus that goes beyond the measures already announced," the IMF said in a report.
"Given the likelihood that the economic weakness will continue into 2010, there should be less concern that the expenditures will only be put into place once the economy has begun to recover," the 185-nation institution said.
The IMF suggested that governments' first consideration should be on the state of their economy and their growth prospects.
"Fiscal authorities have acted globally, but so far the stimulus packages outside the United States have largely been front-loaded by concentrating spending in 2009, with much less to come in 2010," the IMF said in the report.
"In these regions, if there is enough fiscal space to do so without endangering the sustainability of government debt, consideration should probably be given to additional fiscal stimulus packages," it said.
The IMF, which has urged stimulus measures in recent months as the crisis deepens, recalled that not all countries have the same scope for taking such measures.
"Countries with lower debt, and especially countries that are paying a low interest rate on their debt, have relatively more room to expand their fiscal policy," Carlo Cottarelli, the director of IMF fiscal affairs department, said at a news conference.
The report was published as part of preparations for the April 2 summit of the Group of 20 developed and developing countries in London.
The summit is a follow-up to the emergency G20 summit in November in Washington aimed at battling the accelerating global financial crisis and deepening economic downturn.
The IMF in January published economic forecasts revised sharply lower that showed the global economy would grow at a mere 0.5 percent annual pace this year and 3.0 percent in 2010.
The hard-hit advanced economies were forecast to contract 1.7 percent this year before a recovery to a 3.0 percent growth rate.
But IMF managing director Dominique Strauss-Kahn warned Tuesday that the numbers would be revised lower again in April.
According to the report by the Washington-based institution, "it is essential in our view that public sector authorities play their appropriate role in preventing a collapse of confidence in the private sector that might lead to a vicious downward spiral."
The IMF added that it was "particularly important for fiscal policy to take on an increased share of the burden during the period in which the financial sector is recovering and is not yet able or willing to extend credit to households and businesses to the extent that it normally does."
Date created : 2009-03-06